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Asian coconut oil prices likely to slop as supplies rise

MANILA: Coconut oil prices are expected to slip $10 per tonne CIF in Europe this week on the back of rising supplies from the Philippines and Indonesia, vegetable oil traders said.

"Expectations of better supply of coconut oil and rising inventories of palm kernel oil continue to weigh down the market," said a trader from one of the Philippines' largest coconut oil firms.

"After losing between $2 and $2.50 per tonne CIF last week, prices may drop further by $10 per tonne this week."

Coconut oil in Rotterdam, the centre of vegetable oil trade, was last quoted at $550 per tonne CIF for April/May on Friday, the trader said.

Coconut oil and palm kernel oil, a by-product of palm oil, are classified as lauric oils and are used by industry mostly to make soaps and detergent. Europe and the United States are the biggest markets for lauric oils.

Industry officials and traders have said they expected the average price of coconut oil this year to drop below $500 per tonne CIF from $760 per tonne last year due to rising supplies.

Coconut oil prices last fell below $500 per tonne CIF in 1993.

Traders have said coconut oil exports from the Philippines, the world's top shipper, may double to 900,000 tonnes this year from about 450,000 tonnes in 1999.

They also see stable supplies of coconut oil from Indonesia, the world's second largest supplier, due to better weather.

Demand for coconut oil in Europe and the United States have remained slow in previous weeks in anticipation of lower prices in the coming months, traders said.

"What they do is just buy immediate requirements," a second trader said.

LOW PRICES MAY LURE BUYERS

But one analyst said buyers may emerge soon to take advantage of low coconut oil prices.

"A quick look at inventories in both the (United States) and Western Europe will reveal that consumers have eaten up their reserves built in 1998/1999," Solomon de la Pena, a consultant on laurics oil in the Philippines, said in a paper delivered at an Asia edible oil conference in Manila last week.

"They are estimated to have less than a month's supply-- and as plants gear up for increased activity in the spring, it is time to fill up pipelines," de la Pena said.

De la Pena forecasts Philippine coconut oil exports this year will surge to 805,000 tonnes from the year-earlier 458,110 tonnes.

Of the total exports this year, the Philippines may ship 115,000 tonnes in the first quarter and 180,000 tonnes in the second quarter, rising to 240,000 tonnes in the third quarter and 270,000 tonnes in the fourth quarter, de la Pena added.

Indonesia is expected to export 450,000 tonnes of coconut oil this year from 375,000 tonnes in 1999 while its exports of palm kernel oil could rise to 450,000 tonnes from 400,000 tonnes, he said.

De la Pena said supply of both coconut oil and palm kernel oil from the Philippines and Indonesia could reach 1.705 million tonnes this year against an estimated demand of 1.341 million, including those from the United States and Europe.

He said the excess supply could be considered thin because it could be easily absorbed by buyers beefing up inventories.-Reuters